Tuesday, February 23, 2010

Special note of thanks: A most sincere thank you to the dozens of readers who generously sent emails of support and encouragement (and many who also sent generous donations) in response to yesterday's rant. You have made me realize that this site is not just an experiment in self-expression but a conduit for a large, diverse community of very smart, experienced members of the Remnant. It is my duty to support and encourage all of you, just as you have encouraged me. I will be responding to each of you in the next few days.

I take a few wild guesses at which scenarios might play out in the next decade or so.

I know the future is murky and forecasting is an impossible business and all that, but what do you think? Which item do you think has the highest likelihood? Which items have negligible likelihood?

My thoughts on this:

- 3 or 1b are most likely, and roughly equally probable (note that 1b political unification would probably happen under the foot of some now-peripheral but later-militarily-ascendent subset of the US empire, a la Carroll Quigley's Evolution of Civilizations model)

- None of the items have negligible likelihood.

Thank you, N.G., for summarizing the key puzzle of the next decade: Can the Status Quo (Neoliberal cartel capitalism/Empire/Savior State based on cheap credit and fossil fuels) be reformed into something which is politically, financially and environmentally stable/sustainable?

My answer: a big fat "no," for the reasons laid out in the Survival+ chapters "The Crisis of Neoliberal/Predatory Capitalism," "Over-Reach and Inequality" and "Insurmountable Barriers to Structural Reform."

I cannot possibly summarize the dozens of ideas fleshed out in these chapters, but here are a few points which are excerpted from the Survival+ analysis:

1. All civil societies/cultures develop Elites; this is the nature of social animals. Elites are self-organizing groups which share the same self-interests, that is, a higher-order clique; they are not conspiracies or formal organizations.

2. Under certain conditions, the structural obstacles/negative feedbacks which constrain Elite dominance weaken and the Elites (private and public/State), like any other human group, seek to exploit the resulting windfall.

3. This leads the Elites to over-reach which creates positive feedback: the more wealth and influence the Elites/State control, the easier it becomes to control even more. The net result is the Elites and the State's share of the national income rises to historic extremes.

4. Regardless of the exact nature of over-reach--expansionist warfare or financial leverage and looting are two popular choices--the interests of the Elites and the society as a whole diverge. As this divergence grows, the social contract between the Elites and those whose productivity powers the economy and society begins fraying.

5. Over-reach ontologically (inherently) leads to structural imbalances which then threaten to destabilize the productive middle class which supports the Elites. Due to the overwhelming power of the Elites/State partnership's fiefdoms, structural reform is impossible (see Chapter Twenty).

6. As the productive middle class's share of national income shrinks, a well-concealed,opaque parallel system of dominance with a structure of its own arises to exclusively serve the interests of the Plutocracy/State Elites (apparatchiks). The hidden mechanisms are many: backroom deals, unwritten "understandings," price-fixing and other forms of collusion; cash payments and other "gifts and donations;" political favoritism (special admission to elite public universities for the well-connected); and a cornucopia of financial benefits: access to initial public offerings, special tax laws written to reward a particular enterprise or cartel, and so on.

7. The State, which was intended as a bulwark against the natural dominance of concentrated private capital and Monarchy, has instead become the handmaiden of the rentier-financial Power Elites. The Elites and the State have thus become partners in the task of diverting ever-larger shares of the national income to their own coffers.

8. As a result, inequality--as measured by shares of the national income and wealth--widens, furthering the divergence of interests between the productive class and the Elites/States' unproductive fiefdoms and dependents.

9. The State/Elites seek to counter these growing imbalances by extracting more from the productive class via taxes and "theft by other means" and masking this rising inequality by manipulating the politics of experience via relentless mass media propaganda.

The goal is four-fold: nurture complacency and fatalism in the citizenry; divert their attention from the concealed parallel system that benefits the Plutocracy and State Elites exclusively; legitimize simulacrum democracy and delegitimize protest.

10. To keep the State dependents passive and unthreatening, the Elites/State placate this class with "bread and circuses," State-funded entitlements paid for by raising taxes on the dwindling productive class. Under the guise of entitlements, the State (and the Elites who control it) has in effect bought the passive complicity of its dependents in the Elites' growing dominance of national income and wealth.

11. Having over-promised entitlements to the unproductive and garnered the majority of national income and wealth for themselves, the Plutocracy/State Elites can only tax the productive class so much lest they kill the horse they ride so majestically. Their only alternative to loss of income and power is to debauch the currency by printing money and debauch credit by borrowing far in excess of what can possibly be paid back.

12. The debauchery of credit and currency and rising inequality/diverting of national income to the Elites continues in a process of devolution until a phase shift/tipping point is reached and the status quo collapses in insolvency.

This process is both post-Marxism (that is, occurring outside the framework of Marxist theory) and post-Neoliberal State Capitalism--in other words, these broad intellectual frameworks failed to predict or account for the coming devolution and collapse of the State/rentier- monopoly capital Power Elite partnership.

The grand experiment of the State controlling the private economy has failed.

Both the Marxist/Socialist/"Command Capitalist" model of government control and ownership and the Neoliberal State Capitalist model of the State controlling the economy via monetary and fiscal manipulations have failed, for in each model there is no negative feedback to State over-reach and expansion, or any negative feedback to limit extreme concentrations of power via State or cartel control/ownership of national assets and income.

As the State and the predatory cartel Elites (the Plutocracy) who control the State's machinery gorge on the national wealth (windfall exploitation), the State's interests radically diverge from those of the citizenry.

end of excerpt

Since the State and Rentier-Financial Power Elites' interests are united against the interests of the citizenry in both the authoritarian and quasi-Democratic models, then successful reform under either model is impossible.

The State retains unique monopolies on four sweeping powers:

1. "legitimate" violence2. conscription3. taxation4. inflation

The first enables it to repress, suppress and oppress its citizenry via quasi-legal justifications ("emergency powers") via violence or the threat of violence.

The second enable it to draw upon its own citizens to wage wars of Empire or conquest. This power was relinquished in the early 1970s in a de facto "Grand Compromise" with the middle class: the State will stop drafting your sons to fight wars of Empire/conquest if you stop challenging the State's Status Quo.

The third enables the State to strip-mine the productive classes, drawing funds to placate the unproductive classes with "bread and circuses" and to divert ever-larger shares of the national income and wealth to the State's Fiefdoms and their private Elite Masters (The Plutocracy).

The fourth enables the State to inflate away its own rising debts while wiping out much of the wealth of the productive classes (those with earned income as opposed to unearned rentier income).

If the State is unable to create inflation due to massive credit losses which dwarf even the State's ability to create money/credit, then the State's debts become unsustainable and the State collapses in insolvency.

Given that real reform is ontologically impossible without the destruction of the partnership between the State and the Power Elites of cartel/crony capitalism,that informs our analysis of the second part of N.G.'s question: de jure (legally enacted) or de facto political disintegration.

Many have speculated that the U.S. could break into smaller regional nations which possess some inherent geographical and/or cultural ties.

My answer begins with this question: which model, a large nation-state (existing U.S.A.) or smaller regional powers, best serves the interests of the predatory/cartel/crony capitalist Power Elites who will survive the insolvency/implosion of the Savior State? Which best serves the interests of the citizenry?

I address this in the final chapter of Survival+, "Structuring the New American State."

I conclude that despite their fears of Central State dominance of the states and citizenry, the Founding Fathers selected a Republic (central State government) for its unique features as a counterweight to invasion/foreign interference and to countering the very private-sector Elites which now dominate our government at all levels.

The Constitution is mute about great concentrations of capital and financial/political power; it neither enables them nor precludes them. That choice is up to the citizenry. The passive, cowed, confused citizenry of today has, in its passivity and complicity with the Savior State (which bought us off with entitlements), enabled concentrations of financial power to buy political control of the Central State's machinery.

An engaged citizenry could demand the Central State break up cartel/crony/predatory capitalism's concentrations of power.

Smaller regional powers would inherently be more vulnerable to crony/cartel Elites' power. The full financial weight of global capital would be focused on a smaller target.

It could be argued that smaller regional powers (the "alliance" of Washington, Idaho, and Oregon, the nation-state of Los Angeles, etc.) would be more within the control of their citizenry, and the ancient Greek model of nation-states lends some credence to this argument for the break-up of the U.S.A. into smaller states.

It comes down to which model best serves the interests of financial Elites and the citizenry. I doubt that the Wall Street/banker crowd will care much about the governance of any particular region; lobbying/buying the leaders of an alliance or a city-state is not much different that lobbying Congress now.

So the question boils down to what model best serves the interests of the citizenry. I conclude that the large, globally influential nation-state U.S.A. best serves the fundamental interests of the citizenry--if its government is both limited and accountable to an engaged citizenry.

Others may disagree, and that debate is an open one. In any event, while it is possible the U.S.A. breaks into regional alliances or city-states, either by legal actions such as elections or Supreme Court rulings (de jure) or de facto (the US remains a nation in name but in practice is a toothless alliance of regional states), I would posit that any such geographic/political re-ordering would only arise from a Great Crisis such as losing a global nuclear war, a revolution on the order of China's 1949 upheaval or the French Revolution or equivalent destruction of the machinery of the Status Quo.

So the scenario I consider most likely would be along the lines of "unsuccessful reform and de facto political and financial devolution, leading to a Great Crisis and Spiritual Awakening."

I know this last item isn't popular with the spiritual-less Status Quo punditry and Apocalyptic Doomer ideologists, but the U.S. has a long history of grass-roots spiritual movements called Great Awakenings.

The Great Awakening of the 1740s led to the American Revolution, and the Awakening of the 1840s was a precursor to the Civil War.

I know it is popular now in various revisionist histories to see both crises/struggles in purely financial terms ("It's all economics, man!") but any exploration of the politics of experience of the time would unearth a spiritual core which existed outside the purely economic.

Again, I realize this line of thought is completely alien to the sort of post-modern relativistic, "ironic" analysis which currently dominates academia and the popular culture. Nonetheless I would say that the Chinese Revolution of 1949 was in the "lived" terms of its participants (i.e. in their politics of experience) a spiritual revolution which created a fervor, drive, hope and renewal which was both internal and external. This revolutionary spirit cannot be distilled down to some economic model or analysis. Any such attempt would completely violate the lived politics of experience of the participants.

That this revolution was squandered by Mao and his cronies is another story.

My point is simply this: a critical causal factor in the current "Depression Leading to Insolvency" is the spiritual rot at the very heart of the status quo "marriage" of the Savior State/Empire and crony/predatory/cartel "capitalism".

My own thinking on what sort of crisis might occur has been influenced by The Fourth Turning, which posits an 80-year cycle of crisis and transformation in American history. 1781 (American Revolution), 1861 (Civil War), 1941 (World War II) and next, 2021.

Here are some speculative thoughts on the nature of the crisis "due" for 2021.

1. Insolvency of the Savior State: not just likely but guaranteed by 2021.

2. collapse of the dollar/creation of a "new dollar," systemic financial crisis. Likely.

3. Political upheaval/peaceful overthrow of the status quo Demopublicans and their crony/predatory Power Elite Masters: likely. I would place the emergence of a new Third Party as a rather high probability, for the simple reason that so few give this any credence whatsoever. Meanwhile, U.S. history is replete with examples of new political parties emerging, either under the name of the "old" party or with a new name.

4. Global nuclear war. Possible. China's leadership may decide that an external "enemy" must be blamed for its internal devolution/crisis. The U.S. is the prime target, and the "reward" would be both political hegemony of Asia and control of the globe's remaining key resources.

The highest likelihood for such a war is miscalculation of American resolve. As the U.S. Savior State implodes, other nations might mistakenly calculate the U.S. has lost its nerve or ability to protect its global interests/Empire. As an example from history, the leaders of the Japanese Empire reckoned that America would sue for peace after its Pacific Fleet was smashed at Pearl Harbor in a surprise attack.

That miscalculation cost Japan its Empire and a generation of its citizens. In one of history's great ironies, it vaulted the U.S. to global hegemony as the U.S. filled the vacuum left by old powers.

Given the staggering weaknesses of American culture (a whiny culture of entitlement), it is easy to anticipate another power concluding that this overblown, self-absorbed culture of overfed sickly weaklings will cave in to modest pressure/threats.

4. Environmental crisis/famine. The U.S. is still rich in expertise, soil, water, and at least in some circles, drive and determination. Most ancient cultures fell or collapsed due to famine brought on by drought, overpopulation or mismanagement of resources. While that is possible in the U.S., it seems more likely to be a process rather than a crisis.

Nonetheless, a famine/drought/energy "famine" would likely trigger an authoritarian response (rationing, price controls, etc.) by the Central State, which could then trigger a political crisis if the State botched the rationing or favored its Elites too visibly.

These are mere guesses; nobody knows the future. The likeliest path to me is this: the current financial devolution leads to a nadir in 2012-2014; a political change heralds an era of reformist hope which is dashed by 2016 as the status quo Elites strangle/co-opt all reforms which might diminish their perquisites/powers.

This launches the final slide to insolvency and a Grand Crisis/Transformation in 2020-2022.

If you'd like to share your own speculations about the future, please join theDailyJava.net forum. Just click on the image at the end of today's entry, then select the "Of Two Minds--Charles Hugh Smith" link. There are a number of threads in that category; select "big wild guesses," register and then contribute your thoughts/links/ideas.

If you haven't visited the forum, here's a place to start. Click on the link below and then select "new posts." You'll get to see what other oftwominds.com readers and contributors are discussing/sharing.

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